According to reports, ARM, a chip design company of Softbank Corp. Group, plans to adjust its business model to increase the price of its chip design, hoping to increase the company's revenue before this year's IPO (initial public offering).
Currently, ARM's chips are designed to be used in more than 95% of the world's smartphones. ARM recently informed several of its biggest customers that its business model would change fundamentally, according to several industry executives and former employees.
ARM plans to no longer charge chipmakers based on the value of the chip, but on the value of the equipment, these people said. This means that ARM will earn several times more for each chip design it sells, because the average price of a smartphone is much higher than that of a chip.
ARM plans to no longer charge chipmakers based on the value of the chip, but on the value of the equipment, these people said. This means that ARM will earn several times more for each chip design it sells, because the average price of a smartphone is much higher than that of a chip.
Clearly, this change will be one of the biggest changes to ARM's business strategy in decades. The move comes as Softbank Corp. CEO Masayoshi son (Masayoshi Son) seeks to boost ARM profits to attract more investors in the upcoming IPO.
"ARM is telling customers,'we want to get more money for roughly the same thing'," said a former senior employee who left ARM last year. Softbank Corp. 's move is also a test of the market value of ARM's monopoly position. "
Softbank Corp. plans to start pushing for ARM pricing reform as early as next year, according to people familiar with the matter. But so far, Softbank Corp. has been frustrated by customers' reluctance to accept the new pricing arrangement.
MediaTek, Ziguang Zhanrui and Qualcomm, as well as a number of Chinese smartphone makers, including Xiaomi and OPPO, have been notified of planned pricing changes, according to people familiar with the matter.
According to ARM's adjustment plan, royalties will be based on the average selling price of mobile devices, not the average selling price of chips. These changes will mainly involve ARM's best-known "Cortex-A" design, which is crucial to the development of smartphone processors.
Charging according to equipment price is a common practice in the telecom equipment market, and Qualcomm, Nokia and Ericsson all use similar models for patents. But the problem for ARM is that the current charging model has taken root and is now trying to change its pricing strategy.
Charging according to equipment price is a common practice in the telecom equipment market, and Qualcomm, Nokia and Ericsson all use similar models for patents. But the problem for ARM is that the current charging model has taken root and is now trying to change its pricing strategy.
By comparison, the average price of a smartphone in 2022 is $335. While ARM is unlikely to seek royalties of up to 1-2 per cent per device, people familiar with the matter expect ARM's new pricing strategy to significantly boost its overall revenue.
"under the new pricing model, licensing fees will be at least several times higher than the current one," said an executive at a Chinese smartphone maker. " "We have been told that the new pricing model is planned to be implemented in 2024," the executive said. "
Some of ARM's customers, including Apple, who are both chipmakers and device makers, have special license and royalty agreements with ARM. An industry executive said Apple was not involved in the discussion of ARM adjusting its business model.
ARM, Softbank Corp., Qualcomm, MediaTek, Ziguang, Xiaomi and OPPO all declined to comment.
Responsible Editor: Zheng Zhuo
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